The response to our last article surrounding Barack Obama was timely in the face of the Harper government's involvement in his campaign. The US media called the crisis last week "NAFTA-Gate"; however it turns out that our government was misleading and now must conduct an inquiry as to why diplomatic communications were leaked to the US media. This will do wonders for a Stephen Harper and President Obama relationship!
What has not been discussed in great detail is the impact that NAFTA and Free Trade agreements have on your business. According to the data, trade among NAFTA partners has increased by 129.3 per cent since the agreement was signed. However, the total trade between the USA and non-NAFTA partners increased by 123.8 per cent in the same period according to research by Gary Hufbauer in 2005. One would expect a much larger gap when comparing these numbers. Any business looking to export their goods and services should take the time to micro-analyze these numbers.
The first thing that these numbers should tell you is that the United States, in many cases, is the first international market a business should consider exporting too. It is close proximity to our border, and the fact that it is the largest market in the world, is the most obvious reason.
Additionally, both nations share similar cultural trends and infrastructures that allow for trade to take place. As Canadians, we know the United States from the various magazines, TV Shows and newspapers that are readily available to us. NAFTA has helped facilitate Canadian company's entry into the United States and has increased our exports dramatically to the largest economy in the world.
That being said, your organization must be aware of key demographic shifts in the US population. According to the Pew Research Centre, visible minorities will become the majority across the US by 2050. Hispanics, African Americans and Asian Americans will be the ethnic make up of this new majority.
As well, your business must understand where your products and services will have core strength.
Southern States and West Coast States can be as distinct as Quebec and Alberta are here in Canada. Charles A. Johnson's study in the American Journal of Political Science shreds light on many of theses differences. Therefore, be careful not to treat every region of the USA the same.
Hispanics and African Americans in particular have a powerful voice in political, social and economic matters as seen during the US primaries in Arizona, California, Texas, Alabama and the South Carolina. It is therefore important to research data in all of these areas as you develop your US export strategy. Good sources of information are available from the US Census Bureau (http://www.census.gov) and The National Urban League (http://www.nul.org).
While NAFTA has made it easier for Canadian businesses to export to the US, there have also been barriers. US Protectionism is normally high in an economic downturn. Therefore, your organization must seek leaders who truly grasp the political climate of the United States. This way, you will not be blinded by a candidate running for President who speaks about re-negotiating NAFTA. As with the "NAFTA-gate" scandal, Canadian companies spoke in horror about the prospects of the agreement being re-opened. Such emotion was also expressed by government officials such as David Emerson and Jim Flaherty. However, when an organization and government take the time to understand the politics of the United States, they will observe protectionism early thus allowing them to be proactive instead of reactive.
Unfortunately, the current thinking of too many policy/business leaders in Canada is that the only market worth exporting to is the United States. The United States accounts for 82% of our exports followed by the UK at 11%. What our trade numbers do not tell us is how much of our trade in the US is with a growing visible minority business community. The US has a Department of Small Business, who unlike Canada, focuses heavily on increasing business with visible minority owned businesses. The fact that the US has a federal agency truly dedicated to small business is the drastic opposite of what we have here in Canada – where the Canadian Federation of Independent Business has numerous complaints about our government. Your business must be able to adjust your culture to take advantage of these opportunities.
Free trade and trade agreements are beneficial to societies if they are fair to everyone. This has been a challenge with various trade agreements around the world. Your organization's challenge is to balance the need for fairness while delivering profits for your stakeholders. Your business can be successful in the US if it takes the time to figure out the demographics, political culture, and the increasing role of small business. NAFTA is only the first step, the rest is truly up you and your executive team.
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